Early defects, ironically, showed Lexus' commitment to quality

What happens when a brand founded on the slogan "The Relentless Pursuit of Perfection" turns out to be imperfect?

The newborn Lexus Division suffered its first recall in December 1989, only a couple of months after the first cars went on sale.

Better than any English word, the German word schadenfreude(SHAH'-den-froy-deh) probably describes how rival luxury brands such as Mercedes and BMW felt at the news. It means "joy at the misfortune of others."

The notion that the much-hyped perfect car brand was forced to announce a recall was so jarring that it made network TV news on Dec. 4, 1989.

"It was a big deal," said Dave Illingworth, who was then Lexus Division general manager.

RECALL? HERE?

Illingworth, now 64, confessed in a recent interview that nobody at Lexus ever imagined they would be faced with a recall. "We thought, 'That's never going to happen,'" he said.

But right out of the box, Lexus was confronted with the need for a double-barreled recall: for a cruise-control defect that could cause an accident by making it harder to stop; plus a center high-mounted stop light that could overheat. The problems affected more than 8,000 LS 400s —all that had been sold.

At best, it was embarrassing. At worst, it was potentially lethal for the startup Lexus brand. "About two years before that, Audi had the unintended acceleration situation and mishandled it, and sales dropped 50 percent," Illingworth said.

Audi was brusque in blaming driver error for accidents, saying drivers mistakenly stepped on the accelerator instead of the brakes. The backlash from Audi's initial reaction and a devastating TV segment on "60 Minutes" nearly drove the brand out of the United States.

With the Audi disaster in mind, Illingworth said, he knew it was time to put up or shut up.

Illingworth had written the "Lexus Covenant," which was signed by every dealer. The covenant says in part that Lexus cars will be "the finest ever built." It goes on to say, "Lexus will treat each customer as we would a guest in our home."

"If that covenant means anything, we do the right thing," Illingworth said.

Doing the right thing, Lexus-style, meant picking up the cars, replacing the appropriate parts, filling the cars with gasoline, washing them and taking them back again, in a hurry.

It took an all-out, all-hands effort, recalls Steve Haag, who was part of the Lexus field force at the time.

"I was working in Chicago, in the Central Region office. I'm not involved in service; there were people that were more technically involved than I was. But they called everybody in, everybody in the field organization ... and mobilized everybody," he says. Haag, 48, is now corporate manager of private distributors.

A TURNING POINT

Haag says Illingworth told the group, "We can either fail, the brand will fail, or we can grab it and make it a win."

At the time, there were fewer than 100 Lexus dealers in the United States. That meant some customers lived hundreds of miles from the nearest dealership. In those cases, Lexus flew in technicians to do the work on the spot, including for one owner in Alaska.

According to The Lexus Story, a book the company published in 2003, completing the recall by typical methods could have taken a year. By pulling out all the stops, Lexus got most of the repairs done in a few weeks.

James D. Power IV and Chris Denove wrote in their 2006 book, Satisfaction: "We believe this recall marked the day that Lexus was truly born, and not the day it sold its first car. The recall was the day that Lexus showed the world what it really meant to be customer-focused."

The recall became a case study in building customer good will. The Lexus Story brags that instead of taking lemons and making lemonade, Lexus had done even better, taking lemons and making margaritas.

By New Year's Day 1990, competitors' feeling of schadenfreude was more like "shock and awe."